Drivers and Retailers Watching Pump Prices

Gas Pump PricesWe may be letting out a little sigh of relief as we visit the pump this week, noticing a slight decrease in gas prices.  For those pumps well over $4, however, a 10 cent decrease seems like a small feat in the greater battle. According to the Wall Street Journal, U.S. Attorney General, Eric Holder, is asking “regulators to make sure fraud or manipulation does not prevent consumers from enjoying lower prices at the pump as the price of crude oil declines. “ Holder’s efforts began Thurs., May 5, to make sure “declines in wholesale oil prices trickle down to consumers,” as crude markets saw a dramatic drop, falling 8.6 percent.

With crude oil falling below $100 for the first time since March, and Holder’s consumer focused efforts, those drivers visiting the pump should be able to rest assured that they will see further gas price decline as summer approaches. As the following report from news station, KOBTV, claims, prices may fall as much as 50 cents.

Crude Oil Prices and the Independent Retailer

Market pressure is on service stations to cut their prices as quickly as possible as Holder’s fraud task force is working “to ensure that lower prices make it to the retail level.” Holder is trying to avoid a rockets and parachutes phenomenon, in which increased oil prices cause pump prices to rocket up, but as oil prices come down, pump prices seem to parachute down at a slower pace. And although independent gas station retailers face the burden of fraudulent charges as they try to sell the 8,000 gallons they bought the previous day at a steeper price, before marking down pump prices, other independent retailers may see benefits of reduced gas prices. These include:

Influx in sales: It goes without saying that as consumers begin to spend the majority of their work paycheck just to get back and forth from work, little is left even to spend at the discount stores. Chain store giants like Wal-Mart also expressed fear of the effects of rising gasoline prices. With most of its customers living paycheck to paycheck, Wal-Mart CEO, Mike Duke, expresses his concern, saying, “Lately they’re [customers] are running out of money at a faster clip. Purchases are really dropping off by the end of the month even more than last year. This end-of-month [purchases] cycle is growing to be a concern.” Gas prices, however, are predicted to take a turn for the best by Memorial Day weekend, and as a result, retailers should encounter more consumers willing to open their wallet.

Reduced fuel surcharges: Reported only a month ago, New York Times’ columnist, Christine Hauser, explains  “With diesel prices near their highest levels since 2008, the impact has started to appear in the first-quarter results of companies like Union Pacific railroad and the Arkansas Best Corporation, which has a trucking subsidiary. Some shippers said they expected to raise fuel surcharges.” It was only a matter of time that retailers receiving shipped goods would feel the effects and in turn so would their customers, as product prices increased. With a decrease in oil price, however, the shipping line and supply chain can now breathe a little easier.